A blog of the NYU Colloquium on Market Institutions and the Leipzig Colloquium on the Market Order

The Calculus of Consent II

In Chapter 5, “Organization of Human Activity,” Buchanan and Tullock discuss what constitutes a “rational” choice concerning social arrangements. They write, “We have assumed that the rational individual, when confronted with constitutional choice, will act so as to minimize his expected costs of social interdependence, which is equivalent to saying that he will act so as to maximize his expected ‘utility from social interdependence’.”

They then analyze all possible orderings of a, b, and g. This is all well and good, but it strikes me as rather empty of oomph. If these “costs” are defined narrowly, then the analysis is plainly false — I may use method b to organize my BBQ because I like socializing, despite the fact it would be far “cheaper” to just cook dinner for myself. But if one defines the costs broadly enough, so that we include the “cost” of not having friends around, the analysis becomes vacuous — all that is being said is that people pick the things they prefer, and all of the ordering business becomes pointless.

They continue, “the individual is assumed to be able to order the expected costs from (1) … (2)… and (3) collective or governmental action… We assume that the individual can order these values for each conceivable human activity, from tooth brushing to nuclear disarmament…”

Trying to produce some “oomph” from this deductivist analysis, they write: “However, in a positive sense, we have actually done little more than to say that the individual should choose the organization that he expects to be the most efficient.”

In fact, haven’t they said (by assumption) that the individual always does “choose the organization that he expects to be the most efficient”? Isn’t that what their assumption stated just above means?

They continue, “The most important implication that emerges from the approach taken here is the following: The existence of external effects of private behavior is neither a necessary nor a sufficient condition for an activity to be placed in the realm of collective choice.”

But, given their assumptions, this implication appears to me to be of no importance whatsoever: it is true, but individuals already do recognize that this about external effects.

Of course, this is an important point, but its importance rests on the patent falsity of Buchanan and Tullock’s assumptions.